FirstEnergy, Boich sell 1/3 stake in Montana mine

MelodieWarner

FirstEnergy Corp.
FE, -0.30%
and Boich Cos. sold a one-third interest in their Signal Peak coal mine venture to Gunvor Group Ltd. for $400 million.

"We evaluated multiple offers for Signal Peak, but the agreement with Gunvor Group enabled us to obtain a substantial return on our initial investment while at the same time creating a joint venture with one of the world's leading commodity trading organizations," said FirstEnergy President and Chief Executive Anthony J. Alexander.

The energy company and Boich, a privately held coal company, originally purchased Signal Peak in 2008 as a joint venture. FirstEnergy initially paid $125 million for a 45% stake in the Montana coal mine and invested an additional $8.5 million in 2009 to raise its interest to 50%.

FirstEnergy, which will receive about $260 million of the proceeds, said the current value of the Signal Peak operation is more than $1.5 billion, including existing debt.

The deal will reduce FirstEnergy's debt by $360 million, due to deconsolidation, and will result in an estimated gain of $390 million from the revaluation of the asset.

The operator of utilities serving 6 million customers in Ohio, Pennsylvania and New Jersey is facing weak demand and pricing for wholesale electricity due to tough economic conditions. The company said in August its second-quarter earnings fell 33% as higher costs more than offset a 32% revenue rise.

FirstEnergy shares closed Monday at $44.08 and were inactive premarket. The stock has risen 12% over the past 12 months.

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